Note: For the purposes of impairment assessment, goodwill is allocated to the cash generating unit (Tech Mahindra Business services) which represent the lowest level within the Company at which goodwill is monitored for internal management purposes, which is not higher than the operating segments. The recoverable amount of the unit is determined based on discounted cash flows and the key assumptions used are discount rate ( 23%) , budgeted growth rate (1%) and terminal value growth rate (3%). The estimated recoverable amount of the unit exceeds the carrying amount of goodwill for the cash generating unit.
i) Investment in these entities is not denominated in number of shares as per laws of country of incorporation i.e. The People’s Republic of China and Vietnam.
ii) The number of shares held in Tech Mahindra De Mexico, S.DE R.L.DE C.V. comprise 1 share (March 31, 2023- 1) each of Peso 2,999 and Peso 1; fully paid up of Series A (fixed capital) and 1 share (March 31, 2023 - 1) of Peso 12,931,770 fully paid up of Series B.
iii) The number of shares held in Sofgen Holdings Limited comprise 13,739,910 Ordinary shares (March 31, 2023 - 13,739,910) and 27,062 shares of Class A (March 31, 2023 - 27,062).
iv) The number of shares held in Tech Mahindra Fintech Holdings Limited comprise Class A 62500 Ordinary shares (March 31, 2023 - 62500) and Class B 62500 Ordinary shares (March 31, 2023 - 62500)
v) As per the Scheme of merger of the earstwhile Mahindra Satyam Computer Services Limited with the Company with effect from June 24, 2013, the Company had created TML Benefit Trust (Trust). As per the Scheme, the Company transferred, out of its total holding in Satyam as on April 1, 2011; 204 Million equity shares to the Trust, to hold the shares and any additions thereto exclusively for the benefit of the Company. Post-merger with the Company these shares were converted into Tech Mahindra Limited’s shares in the ratio of 2: 17. As of date, post bonus and split approved by the shareholders from time to time by the Company; the Trust holds 94,235,629 (March 2023: 94,235,629) shares of the Company.
vi) The investment in equity shares which are not held for trading have been measured at fair value through other comprehensive income. Accordingly, no dividends have been recognised on these investments unless disclosed otherwise.
vil) Amounts less than ' 0.5 Million are reported as "0”
viii) In current year Company has sold 33% stake of Tech Mahindra South Africa to Cobanga Tech Proprietory Limited
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 53 for details relating to stock options. 20,100,000 shares has been reserved under employee stock option scheme.
iii) On May 13, 2022 the Board of Directors of the Company had proposed a special dividend of ' 15 per share and final dividend of '15 per share in respect of year ended March 31,2022 and shareholders at the Annual General Meeting held on July 26, 2022 approved the dividend amounting to ' 29,183 Million which is paid in the month of August 2022.
The Company has paid a special dividend of '18 per share amounting to ' 17,522 Million in the month of November 2022.
On April 27, 2023 the Board of Directors of the Company had proposed a final dividend of ' 32 per share in respect of year ended March 31, 2023 and shareholders at the Annual General Meeting held on July 27, 2023 approved the dividend. The Company has paid the dividend amounting to ' 31,192 Million.
The Company has paid an interim dividend of '12 per share amounting to ' 11,710 Million in the month of November 2023.
On April 25, 2024 the Board of Directors of the Company have proposed a final dividend of '28 per share in respect of year ended March 31, 2024 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of ' 27,349 Million.
iv) During the year ended March 31,2020, the Company bought back 20,585,000 equity shares for an aggregate amount of ' 19,556 Million. The equity shares bought back were extinguished.
v) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Company’s risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
Note i: Expenditure on Corporate Social Responsibility
a. Gross amount required to be spent by the Company during the year is ' 1,124 Million (previous year ' 1,181 million) (calculated at 2% of the average net profits of the Company during the three immediately preceding financial years)
31 COMMITMENTS AND CONTINGENCIES
31.1 Capital Commitments
The estimated amount of contracts remaining to be executed on capital account (net of capital advances) as at March 31, 2024 is ' 1,454 Million. (March 31, 2023: ' 1,535 Million).
31.2 Details of investments and purchase commitments
There were no acquisitions made during the current year.
Details of Acquisition during the previous year:
Pursuant to a share purchase agreement, the Company acquired 100% stake in Thirdware Solution Limited on June 3, 2022 for a consideration of ' 7,838 Million out of which ' 6,708 Million was paid upfront. The Company has agreed to pay the selling shareholders over a three years’ period additional consideration of ' 1,130 Million based on certain revenue threshold for the FY2022- FY2024. ' 983 Million represents the fair value of the contingent consideration at the date of acquisition. The estimates are based on a discount rate of 23% and assumed probability-adjusted revenue over the next three years of acquired subsidiary between ' 5,822 Million and ' 9,266 Million. Out of the contractual obligation ' 395 Million has been paid during the year. As at March 31, 2024, contractual obligation towards the said acquisition amounts to ' 150 Million. Thirdware Solution Limited offers consulting, design, implementing, and support of enterprise applications services with a focus on the Automotive industry.
The acquisition will bolster Tech Mahindra’s digital solutions and services in automotive consulting, design, development, and implementation in areas like ERP (Enterprise Resource Planning), EPM (Enterprise Performance Management), RPA (Robotic Process Automation), and IIoT (Industrial Internet of Things). Thirdware’s capability to provide end-to-end implementations and global rollouts of ERP solutions will give Tech Mahindra an edge in the manufacturing space.
31.3 Bank guarantees and letters of comfort
i. Bank Guarantees outstanding as at March 31, 2024: ' 14,904 Million (March 31, 2023: ' 15,137 Million).
ii. Letters of support/letters of comfort of USD 42 Million, ' 3,505 Million (March 31, 2023: USD 30 Million, ' 2,465 Million) to banks for loans availed by step down subsidiaries of the Company.
31.4 Contingent Liability for Taxation matters
Contingent Liabilities in respect of Income Taxes/ Service Tax/ GST/ Value Added Tax/Customs and International tax to the extent not provided for
31.4.1 Footnotes to the Schedule above
i. Petition before Hon’ble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to ' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011, the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Hon’ble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for '6,170 Million which was compiled by erstwhile Satyam. The BG has been extended up to October 14, 2024.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Hon’ble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
ii. Appointment of Special Auditor and re-assessment proceedings
• In August 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of ' 7,928 Million and ' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
• Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Hon’ble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
31.5 Other Claims on the Company not acknowledged as debts.
i. Claims against erstwhile Satyam not acknowledged as debt: ' 1,524 Million (March 31, 2023 ' 502 Million).
ii. Claims made on the Company not acknowledged as debt: ' 396 Million (March 31, 2023'301 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Act”) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to ' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of ' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of ' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Other contingencies ' 407 Million (March 31, 2023'407 Million).
In addition, the company is a party to litigation/claims in the ordinary course of its business. None of these are expected to have a significant impact on the company and its operations.
The Company does not have any benami Property, where any proceedings has been initiated or pending against the company for holding any Benami Property under the Benami Transactions (Prohibition) Act, 1988.
32 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (‘Code’) relating to employee benefits received the Presidential assent in September 2020. The effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
35 MERGER/AMALGAMATION OF ENTITIES
The Board of Directors of the Company at its meeting held on January 24, 2024 have approved the scheme of merger of Perigord Premedia (India) Private Limited, Perigord Data Solutions (India) Private Limited, Tech Mahindra Cerium Private Limited and Thirdware Solution Limited, four wholly owned subsidiaries with
the Company. Subsequently, the Company has filed the application with Hon’ble jurisdictional National Company Law Tribunal ("the NCLT”). As on the date of the standalone financial statements, the Company is awaiting the order from the NCLT.
36 DIMINUTION IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investment’s carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2024.
At 31 March 2024, the recoverable amount of these investments was ' 4,241 Million.
The recoverable amount of these investments in Tech Mahindra Fintech Holdings Ltd and PF Holdings B.V. was based on higher of fair value and its value in use. Value in use is determined by discounting the future cash flows to be generated from the investment. The carrying amount of the investment was determined to be higher than its recoverable amount of ' 7,172 Million and an impairment loss of ' 2,931 Million during 2024 (2023: ' 5,508 Million) was recognised.
The key assumptions used in the estimation of the recoverable amount of Tech Mahindra Fintech Holdings Ltd are: Terminal growth rate 2%, budgeted EBIDTA margin upto 12% over the budgeted revenue. The values assigned to the key assumptions represent management’s assessment of future trends in the relevant industries and have been based on historical data from both external and internal sources. The recoverable amounts of PF Holdings B.V. was determined to be equivalent to the fair value determined and on the prevailing share price at exchanges.
Estimates of future cash flows used in the value-in-use calculation are specific to the entity based on business plans. The future cash flows consider potential risks given the current economic environment and key assumptions, such as volume forecasts and margins. The discount rate used in the calculation reflects market’s assessment of the risks specific to the asset as well as time value of money.
37 A. Certain matters relating to erstwhile Satyam Computer Services Limited (erstwhile Satyam) :
I n the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at December 31, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtor’s position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (‘SFIO’)/Registrar of Companies (‘ROC’), Directorate of Enforcement (‘ED’), Central Bureau of Investigation (‘CBI’) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
I n 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (‘FEMA’) and the Foreign Exchange Management (Realization, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (‘ADR’) proceeds aggregating to USD 39.2 Million; and
b) non-realization and repatriation of export proceeds to the extent of foreign exchange equivalent to ' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Management’s notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
B. Proceedings in relation to ‘Alleged Advances’
Erstwhile Satyam had, in the past, received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as ‘alleged advances’). These letters were followed with legal notices claiming repayment of the alleged advances aggregating to ' 12,304 Million together with damages/compensation @ 18% per annum till the date of repayment. The erstwhile Satyam had not acknowledged any liability and replied to the legal notices stating that the claims are not legally tenable.
Subsequently, the 37 companies filed petitions for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Hon’ble High Court of Andhra Pradesh in its Order approving the merger of the erstwhile Satyam with the Company, held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in the names of the said 37 companies and not disclosing them as creditors and in disclosing such amounts as ‘Amounts pending investigation suspense account (net)’ in the financial statements. The Hon’ble High Court held, inter-alia, that the contention that Satyam is retaining the money, i.e. the alleged advances, of the ‘creditors’ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved. The matter is pending final adjudication.
Appeals were filed before the Division Bench of the Hon’ble High Court of Andhra Pradesh against the Order of the single judge of the Hon’ble High Court of Andhra Pradesh sanctioning the Scheme of merger of erstwhile Satyam with the Company w.e.f. April 1, 2011, which are yet to be heard.
Further, petition was filed by the 37 companies for winding-up of the erstwhile Satyam with the Hon’ble High Court of Andhra Pradesh which was subsequently rejected. One of the aforesaid companies also filed an appeal against the said order with the Division Bench of the Hon’ble High Court of Andhra Pradesh.
These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions.
In view of the aforesaid and based on an independent legal opinion, current legal status and lack of documentation to support the validity of the claim, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon will not be payable on final adjudication. As endorsed by the Hon’ble High Court in the scheme of merger, the said amount of ' 12,304 Million has been disclosed as "Amounts pending investigation suspense account (net)” ("Suspense Account (net)”), which override the relevant requirement of Conceptual Framework for Financial Reporting under Indian Accounting Standards (Ind AS). Accordingly, the amounts of these alleged advances are disclosed separately from equity and liability of the Company in the books of account.
38 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (‘VGE’) incorporated Satyam Venture Engineering Services Private Limited (‘SVES’) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the ‘SHA’), to purchase VGE’s shares in SVES. The erstwhile Satyam’s action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the ‘Award’). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGE’s challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure
to honor the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyam’s nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on September 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
I n the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Hon’ble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad before the Hon’ble High Court (SVES Appeal).
The Hon’ble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Hon’ble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order Before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Hon’ble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (‘SLP’) before the Supreme Court of India challenging the judgment of the Hon’ble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGE’s challenge to the Award. The said Petitions are pending before the Supreme Court. The Hon’ble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLP’s before the Chief Justice of India for appropriate further course of action.
In December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGE’s petition to amend the complaint. In September 2013, VGE’s appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiff’s Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
39 DETAILS OF THE INVESTMENT PROPERTY AND ITS FAIR VALUE
The Company has assessed the fair valuation of its investment property by an accredited external independent valuers registered under Companies (Registered Valuer and Valuation) Rules, 2017.
The Company has not revalued its Property, Plant and Equipment (including Right’ of use assets) or intangible assets during the current or previous year.
The fair value measurement has been categorized as a level 2 fair value based on inputs to the valuation technique used. The valuation technique used for land is based on prevailing market rates and other assets has been determined on replacement cost.
The Rental Income from investment property for the year is ' 263 Million was included in other income. The Direct Operating expenses to earn the income is not ascertainable.
40 FOREIGN CURRENCY RECEIVABLES
I n respect of overdue foreign currency receivables for the period’s upto March 31, 2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions to write-offs as appropriate. The Management has fully provided for these receivables.
41 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
43 DETAILS OF EMPLOYEE BENEFITS AS REQUIRED BY THE IND AS-19 - EMPLOYEE BENEFITS ARE AS UNDER:i. Defined Contribution Plans
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
• ' 225 Million (March 31, 2023: ' 150 Million) for National Pension Scheme contributions.
• ' 952 Million (March 31, 2023: ' 823 Million) for Superannuation Fund contributions; and
• ' 6,078 Million (March 31, 2023: ' 5,552 Million) for Provident Fund contributions
ii. Defined Benefit Plan
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The following table sets out the Changes in Defined Benefit Obligation (‘DBO’) and Trust Fund plan assets recognized in the Balance Sheet are as under:
ii. Remaining performance obligations
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue. While disclosing the aggregate amount of transaction price yet to be recognized as revenue towards unsatisfied (or partially satisfied) performance obligations, along with the broad time band for the expected time to recognise those revenues, the Company has applied the practical expedient in Ind AS 115. Accordingly, the Company has not disclosed the aggregate transaction price allocated to unsatisfied (or partially satisfied) performance obligations which pertain to contracts where revenue recognised corresponds to the value transferred to customer typically involving time and materials. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
Based on the contract value agreed and committed with customers, the aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2024'323,814 Million. Out of this, the Company expects to recognise revenue of around 76% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
iv. Changes in the Deferred contract cost balances during the year ended March 31,2024 and March 31,2023 are as follows:
Deferred contract cost: Deferred contract cost primarily represents the contract fulfilment cost and cost for obtaining the contract.
48 FINANCIAL RISK MANAGEMENT FRAMEWORK
The Company’s Board of Directors have an overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
*The fair value of cash and cash equivalents, other balances with bank, trade receivables, unbilled receivables, loans, trade payables, lease liabilities and certain other financial assets and liabilities approximate their carrying amount largely due to the short-term nature of these instruments.
Fair value Hierarchy:
The following table summarizes financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
Credit Risk
Credit risk is the risk of financial loss arising from counterparty failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, loans, cash and cash equivalents, other balances with banks and other financial assets. None of the financial instruments of the Company result in material concentration of credit risk.
Credit risk on cash and cash equivalents is limited as the Company generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ' 144,236 million and ' 150,893 Million as of March 31, 2024 and March 31,2023 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Company’s maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
Trade receivables
Ind AS requires expected credit losses to be measured through a loss allowance. The Company assesses at each Balance Sheet date whether a financial asset or a group of financial assets is impaired.
The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information. The Company’s exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2024 and March 31, 2023. The concentration of credit risk is limited due to the fact that the customer base is large.
Market Risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes. The Company’s exposure to market risk is primarily on account of foreign currency exchange currency risk.
a) Foreign currency exchange rate risk
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, where any transaction references more than one currency or where assets / liabilities are denominated in a currency other than the functional currency of the respective entities. Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
b) Foreign Exchange Contracts and Options
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Company’s foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 2 years.
Liquidity Risk
Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
‘Includes allowance on utilization of Special Economic Zone reinvestment Reserve and dividend received from subsidiaries.
**Tax expense is net of reversals, for the year ended March 31, 2024 of ' 1,289 Million. (Year ended March 31, 2023: ' 201 Million), relating to earlier periods consequent to the orders received by the Company or completion of tax assessment.
Current tax for the year ended March 31, 2024 includes tax expense with respect to foreign branches amounting to ' 1,503 Million (year ended March 31, 2023: ' 1,949 Million).
b. For other investments and loans refer note 8 and 12.53 EMPLOYEE STOCK OPTION SCHEME i. ESOP 2006, ESOP 2014 & ESOP 2018:
The Company has instituted ‘Employee Stock Option Plan 2006’ (ESOP 2006) /Employee Stock Option Plan 2014’ (ESOP 2014) and ‘Employee Stock Option Plan 2018’ (ESOP 2018) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company and its subsidiaries. The maximum exercise period is 5 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each grant for ESOP 2014 and ESOP 2018.
ii. TML ESOP - B 2013:
Erstwhile Satyam has established a scheme ‘Associate Stock Option Plan - B’ (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation. Each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Postmerger, the name of the ESOP scheme has been changed to ‘TML ESOP B 2013’.
iii. TML- RSU:
The erstwhile Satyam has established a scheme ‘Associate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)’ to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.
vii. The employee stock compensation cost for the Employee Stock Option Plan 2018, Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the period ended March 31, 2024, the Company has accounted for employee stock compensation cost (equity settled) amounting to ' 668 Million (March 31, 2023: ' 677 Million). This amount is net of cost of options granted to employees of subsidiaries.
ii. The Company has not advanced or loaned or invested funds to any other person(s) or entities, including foreign entities (Intermediaries) with the understanding that the Intermediary shall: (a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or (b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
The Company has not received any fund from any person(s) or entities, including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall: (a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or (b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
iv. The Company does not have any transaction which is not recorded in the books of account that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.
v. The Company has complied with the number of layers for its holding in downstream companies prescribed under clause (87) of section 2 of the Companies Act, 2013 read with the Companies (Restriction on number of Layers) Rules, 2017.
vi. The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
vii. The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
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